Why Unilateral Liberalization Makes Sense
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WASHINGTON - While the world frets over the possible failure of the Doha trade talks, U.S. negotiating objectives remain achievable even in the absence of an agreement, according to a study by the Cato Institute.
In the study, “Leading the Way: How U.S. Trade Policy Can Overcome Doha’s Failings,” Daniel Ikenson, associate director of the Center for Trade Policy Studies, dismisses the assumption that increased trade requires new trade agreements. As Ikenson argues: “Through unilateral liberalization, policymakers can achieve the U.S. objectives of the Doha Round: better opportunities for American businesses, more affordable products for consumers, improved prospects for farmers and producers in developing countries, alleviation of poverty, and greater international receptivity to U.S. policies.”
Ikenson exposes the fallacious premise at the heart of
reciprocal negotiations by pointing out that “U.S trade barriers
are not assets to be relinquished only in exchange for better
foreign market access,” but are in practice, “liabilities that
raise the costs of production for U.S. producers and the cost of
living for American consumers.”
Ikenson acknowledges that “at 1.4 percent in 2005, the average applied tariff rate in the United States is relatively low,” but he points out that “that average obscures the fact that duty rates on many products are in double-digit percentages, which discourages importation of those products and keeps domestic prices higher than they would be otherwise.”
Abolishing U.S. trade barriers and subsidy programs would improve access of foreigners to the U.S. market and simultaneously enhance access of U.S. producers to imported raw materials and components. Through the trade that ensues, U.S. producers would have lower material costs, enabling them “to sell more competitively abroad to foreigners who have higher income,” on account of their greater U.S. sales revenue.
On Wednesday, June 21, at 11 a.m., Dr. Jagdish Bhagwati and Daniel Ikenson will address the issue of unilateral trade liberalization as a path for U.S. trade policy at a Policy Forum at the Cato Institute. For details, please click here.